Feature Article

Five Innovations That Will Disrupt Mobile Advertising

The advertising dollar is going cellular. The Internet Advertising Bureau (IAB) recently revealed that mobile advertising revenues had risen to $12.5 billion per year in the U.S.—and is rising at around 100 percent year-over-year. But what are the key innovations fueling this remarkable rise and how can advertisers take advantage of them?

1. Video

Unless you have been living under a rock, you can’t help but notice the widespread use of video. It is the largest and the fastest growing segment of mobile data traffic. There are also studies to demonstrate the fact that we all prefer to watch video rather than engage our brains by actually reading something or even looking at a picture. Our inherent human laziness has been leveraged by Facebook and YouTube in the past year with auto-play video ads. That’s now being replicated by Twitter. Similarly, some of the largest mobile operators are actively pursuing video-ad solutions, including Verizon with its $4.4 billion acquisition of AOL, which is driven by their evolving video-advertising technology platform.

We are rapidly approaching a time when video ads will be the norm, and if it’s NOT video, people will wonder why not.

2. Beacons

For 10+ years we as an industry have mooted the idea of the location-based ad. That’s when you get the Starbucks coffee voucher just as you approach the Starbucks coffee shop. Well, it finally seems to be taking off—this time for real. Beacon technology, which uses Bluetooth to access users’ smartphones to send instant coupons, popup-alerts and offers, is reaching critical mass deployment, at least in North America. The technology is already being used by the likes of Walmart, Lord and Taylor and Urban Outfitters along with a considerable number of airports among others.

But even more exciting than the rise of “geo-fenced ad campaigns” is the way that Beacon technology binds a consumer’s online persona with their offline purchasing habits for the first time. In near real-time, you receive an offer based on your online profile and it will be relevant to where you are. As soon as you respond “in the flesh” your online profile gets updated—and you receive even more tightly targeted ads. Yes, it is a virtuous (or vicious) advertising cycle!

3. Wearables
Wearable devices, popularized by the Apple Watch, bring new opportunities and challenges. On the one hand, technology now knows more about us than we do about ourselves. Apple’s venture with IBM collects, uploads and processes your personal fitness data. And despite what people tell you about data privacy etc., it’s baloney—your data WILL be used to traffic ads to you. It is highly targeted, personalized and undoubtedly sent as video.

One interesting factor is that these ads, at least in their current form, are not likely to appear on the wearable itself. The screen real-estate and the session times we spend on a wearable device are too small. In a recent Harvard Business Review Ideacast Phil Libin, CEO of Evernote, explained how people usually spent one or two hours a day on desktop/word-processing sessions—and do that a few times. Conversely, we spend just around five minutes on a mobile app, but do so at least 10-20 times a day. When we turn to wearables such as watches, the average session length is only around 5 – 10 seconds, but we do this hundreds of times a day. How do you advertise on a miniature screen in miniscule time? Perhaps you don’t, and the wearables are simply collectors of personal data that can be used to traffic ads to your phone. There is clearly more innovation to come.

4. Retargeting

Retargeting is yet another new kid on the block. The idea behind this is that advertisers re-engage with people who visited their website but navigated away from the site. Re-targeting solutions are designed to re-engage them and draw them back into the buying cycle.

Retargeting works by simply placing a small, anonymous cookie on the device as soon as someone visits a website. As they head off to browse other sites, they are met with highly targeted ads to build up familiarity and provide information on products and services. This greatly improves the ROI on mobile advertising as only customers who have previously engaged with a website are targeted.

With the average cost of acquiring new users rising by nearly 35 percent, it is becoming increasingly expensive to secure new customers. That’s why retargeting makes commercial sense. Put simply, retargeting keeps a business top of mind.

5. Ad Blockers

Ad blocking technology is coming to your mobile. This final trend is interesting because it appears to work in the opposite direction to everything discussed up to now . . . or maybe not.

In fact, ad-blocking on mobile will drive all kinds of new business models. Mobile operators love the idea because it effectively breaks Over-the-Top (OTT), ad-funded businesses as they stand. Indeed, we have already seen that Google will pay ad blockers to not block their ads. But in the longer term, operators may be cutting off their nose to spite their face since the ad model will be broken for everyone—including themselves.

Maybe there will be newer models where OTT players actually start paying operators—although that seems unlikely, right? Or we may see more mobile services funded by ads. In the past this didn’t work since the only people who wanted their phone service funded by ads didn’t have any money. And why target such a group with ads?

And there’s an interesting twist. Companies like Sourcepoint have developed a blocker that blocks the ad blockers (and yes we are waiting for someone to develop the blocker that blocks the blocker that blocks the ad blockers). One Sourcepoint business model prevents users from viewing any editorial content until they have viewed ads. A second variant enables users to pay the publishers not to receive ads. And then we come full circle back to the age-old idea of a paywall, where people pay for content. Innovative? Probably not. But the vicious cycle of advertising technology rolls on.

About the Author: Chris Goswami is Director of Marketing and Communications, Openwave Mobility.